Satisfying the people for any government is always the biggest task for any government in the world. To satisfying their people, the governments ready to implement new schemes and rules which are very helpful for them. Actually, they show full interest in placating the employees for their needs. And to give security to their life the Indian government introduced the Employee’s Provident Fund (EPF) and its miscellaneous Provisions Act in 1952 under the Ministry of Labour and Employment. This EPF is defiantly the finest fruit for all the employees who are applicable for this service. The last EPF interest rate was announced by the Honourable Minister of Labour & Employment Shri. B Dattatreya garu in the 2017-18 F.Y i.e., 8.55%.
How EPF Interest Rate changing Works?
Each and every month, there is 12% deduction from employee salary until he/she left the company, and at the same time, their employer also contributes the same 12% amount of their employee salaries to employees’ individual EPF account monthly. This amount deposited in the employee EPFO account, which is maintained and monitored by the Ministry of Labour and Employment, Govt. of India. And now, the government offering interest on EPF is 8.55%. So, each employees EPF amount is increased by 8.55% rate of interest per yearly.
Assume, at age of 23 an employee A starts his job with 30000 in Company A, and both are contributing the 12% amount towards employee EPF account until the employee reaches the age 62(It’s the retirement age in India now).
12% of 30000INR is 3600 INR
3600 * 12 = 43200 INR
For 1 year the employee EPF balance will be 43200 + 3693 = 46893 INR
For age up to 62 of employee, 46893*39 = 18,28,827 INR
(Note: If the Government increases the EPF interest rate above 8.55% the final amount will be increase.)
The above example is if, we take the present 2017-18 EPF interest rates.
Historical EPF Interest Rates on Provident by the Indian Government:
As in the starting days, i.e. in the era of 1952-1955, the initial EPF interest rate was only 3%. Later the days go on, the government’s changes and this EPF interest rates also change gradually from 3 to 12%. And there is a decrement in 12% interest rates to 8.55% till now.
The EPF interest rate is reviewed by EPFO’s Central Board of Trustee after consultation with the Ministry of Finance. The highest EPF interest rate was given in the time of 2000-2001. And, then gradually there was a decrement in that interest rate. In 1978-1979 time frame, the government offered 0.5%bonus those who didn’t withdraw any amount from their PF during 1976-1977 & 1977-1978. And in the year of 2004-2005, the government offers 0.5% bonus due to the Golden Jubilee celebration of freedom.
If the government announces, there is an increment in EPF interest rate, that obviously they gain the love of all the employees who come under the EPF scheme. So, the government always remembers this matter. Previously there was a rule, not withdraw the PF amount from their EPF account until the employee retirement time. Later, the government has taken some consideration and requests from the people and they slightly change the withdraw rules and conditions.
Present, the employer can not withdraw their PF amount from their EPF account for 5 years. Or if the person loses his job unfortunately and within 60 days if the person fails to get another job, in those situations, he/she can withdraw their full PF amount from their EPF account.
If the employee having any emergency like marriage, educational debts, real estate purchases etc. In these situations, the employee can withdraw 50% of the PF amount from their EPF account.
But keeping in the PF amount in the EPF account gives you interest and later at the time retirement age, this PF amount will become huge as per the EPF interest rate at that time. So, the government and all other officials suggest not withdrawing their PF amount until its big emergency need.
Check the last five financial years EPF interest rates here:
2017-18 the EPF interest rate was 8.55%
2016-17 the EPF interest rate was 8.65%
2015-16 the EPF interest rate was 8.80%
2013-15 the EPF interest rate was 8.75%
2012-13 the EPF interest rate was 8.50%.